INTERGENERATIONAL EQUITY OF PUBLIC DEBT

The government borrowing represents an alternative to increase current taxation. Politicians and voters would rarely (perhaps never) accept higher taxation to cover their current spending. The intergenerational equity of public debt means that it is not the future generations, but those who receive the public goods and services that should pay for them. This paper aims at showing that not all the public spending must be covered through present taxes, but only current expenditure, while expenditure for capital accumulation should be covered when the benefits will occur. The paper also intends to show that financial stability requires a better management of public debt over the business cycle and a fiscal attitude closer to the concept of balanced budgets.